Fannie and Freddie waive some loan requirements amid shutdown

Government agencies and enterprises issued guidance on Wednesday for mortgage lenders and servicers during the current government shutdown, which affects federal employees, services, contractors, vendors and other businesses.

Fannie Mae and Freddie Mac are waiving some requirements for lenders due to the potential inability to confirm income, reserves, tax, and Social Security information from borrowers amid the slowdown in government operations. Their guidance will remain in effect until operations are fully resumed.

Freddie said it will “continue to monitor the situation and may revise or revoke” guidance if the shutdown extends for a prolonged period, according to a Bulletin signed by Kevin Kauffman, senior vice president of single-family seller engagement. Fannie Mae reminded lenders that the shutdown does not relieve them of obligations under laws such as the “ability to repay” standards in the Truth in Lending Act. 

The GSEs are waiving the typical 30-day limit for paystubs, instead requiring the most recent year-to-date earnings statement prior to the shutdown. They are also allowing lenders to waive verification of employment if they provide documentation of their efforts and confirm the borrower is employed.

However, Fannie said the “majority of government employees and other workers impacted by the shutdown will continue to be readily available from automated systems or third-party service providers.”

For reserves, beginning with applications dated on or after Nov. 3, if the shutdown continues, lenders must verify the greater of two months’ reserves, automated underwriting reserve requirements, or manual underwriting reserve requirements.

Federal government operations 

In terms of government verifications, borrowers must still sign Form 4506-C (or an acceptable alternative), and certain IRS documents may be needed if the latest tax return is unavailable. Fannie Mae also noted that, when required, if a Social Security number cannot be validated before delivery, the loan is not eligible for sale to the GSE.

Regarding the National Flood Insurance Program (NFIP), which cannot issue new policies during a shutdown, Freddie said lenders must complete flood zone determinations and ensure properties in Special Flood Hazard Areas have coverage or acceptable proof of pending NFIP issuance. Lenders must later confirm final NFIP coverage once the program’s authority is reinstated. Private flood insurance remains unaffected.

On the servicing side, Freddie Mac and Fannie Mae noted that servicers may offer forbearance to borrowers impacted by the shutdown.

Government loans 

The Federal Housing Administration’s Office of Single Family Housing will continue to endorse loans — with the exception of Home Equity Conversion Mortgages (HECMs), Title I loans and those to HUD employees — under its current multi-year loan guarantee commitment authority “to support the health and stability of the U.S. mortgage market,” the agency said in its lapse plan. 

According to the FHA, while endorsements requiring FHA underwriter review will be limited, certain manual actions such as case number cancellations, reinstatements, and transfers will continue.

Meanwhile, Ginnie Mae said it will continue to perform all functions necessary “to ensure that the market is not disrupted during a potential lapse in appropriations,” including support for the issuance of Ginnie Mae Mortgage-Backed Securities (MBS).

“Single-family and multifamily loans will continue to remain eligible for securitization even in the event of a potential lapse in appropriations, so long as they meet requirements for insurance/guaranty of the insuring/guaranteeing agency when they are pooled and are in the process of being insured or guaranteed,” Ginnie Mae said in a statement.